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DECREE

ON INCENTIVE POLICIESFOR THE SOCIALIZATION OF EDUCATIONAL, VOCATIONAL, HEALTHCARE, CULTURAL, SPORTS AND ENVIRONMENTALACTIVITIES

THE GOVERNMENT

Pursuant to the December 25, 2001 Law or Organization of the Government;

At the proposal of the Minister of Finance,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. Scope of regulation of the Decree

Domains encouraged for socialization include education-training, vocational training; healthcare; culture; physical training and sports; and the environment.

2. Subjects of application of the Decree

a) Non-state establishments established and meeting conditions on operation in the domains encouraged for socialization under regulations of competent state agencies;

b) Individuals and organizations operating under the Enterprise Law which have investment projects, joint ventures, partnerships or establishments in the domains encouraged for socialization and meet operation conditions prescribed by competent state agencies;

c) State non-business establishments contributing capital, raising capital, entering into joint ventures or associations according to law to establish financially independent enterprises or enterprises operating in the domains encouraged for socialization under decisions of competent state agencies.

(Below referred to as establishments in question for short)

3. The Prime Minister shall decide on incentive policies prescribed in this Decree for foreign- invested projects operating in the domains encouraged for socialization at the proposal of the Ministry of Planning and Investment and concerned line ministries.

Article 2. Conditions for enjoying incentive policies

Establishments in question entitled to the incentive policies for socialization co-prescribed in this Decree must be those on the list of entities whose types, sizes and criteria are decided by the Prime Minister.

Article 3. Non-state establishments

1. A non-state establishment is an establishment established and having its material foundations invested by a social, social-professional or economic organization, an individual, a group of individuals or a community and operating on non-state funds according to law.

2. Anon-state establishment is lawfully set up. has the legal person status, independent accounting and own seal and bank account.

Article 4. Principles for implementation of incentive policies

1. Establishments in question set up or licensed must conform with planning and satisfy prescribed standards on sizes and qualifications in order to develop education-training, healthcare, sports, physical training and the environment.

2. The State and society respect and equally treat all products and services provided by establishments in question.

3. The State shall allot and lease land readied for construction to establishments in question in line with land use planning and plans; support site clearance and compensation for investment projects in the domains encouraged for socialization that have themselves completed this work from the date this Decree takes effect.

4. The State gives enterprise income tax incentives to establishments in question to encourage their investment in improving their material foundations and service quality.

5. The State supports social policy beneficiaries when they use services provided by establishments in question. The mode of support shall be decided by the Prime Minister.

6. Establishments in question may enter into joint ventures or partnerships with domestic and overseas individuals and organizations to raise capital, attract human resources and technologies and improve service quality in accordance with their functions and tasks.

7 Assets supported, donated, presented as gifts or provided as non-refundable aid to establishments in question during their operation must not be divided among individuals and shall only be used for the common interests of the establishments and community.

8. Establishments in question may supply public services funded or ordered by the State; bid for domestically or foreign-funded contracts and projects in accordance with their prescribed functions and tasks.

9. Professionally accredited non-state healthcare establishments and enterprises may provide medical examination and treatment for health insurance buyers at the latter's free choice.

Chapter II

INCENTIVE POLICIES FOR SOCIALIZATION

Article 5. Lease, building of material foundations

1. Provincial-level People's Committees may use their existing housing and infrastructure funds or build housing and infrastructure for long-term lease to establishments in question at a preferential charge. The highest preferential level of prices does not include land rents, site clearance compensations and profits earned by housing and infrastructure enterprises.

2. Provincial-level People's Committees shall create conditions favorable for establishments in question to build schools, hospitals, recreational centers, sports centers, museums, libraries, culture centers, theaters, cinemas, etc., in conformity with the planning already approved by a competent authority.

Article 6. Land allotment and lease

1. Establishments in question may receive or lease land with completed site clearance from the State for the construction of works in one of the following forms:

a) Land allotment free of land use levy;

b) Rent-exempt land lease:

c) Land use levy-exempt allotment of land subject to land use levy.

For urban and residential land, provincial-level People's Committees may, depending on local realities, prescribe land allotment with land use levy payment and rent-based land lease as well as exemption from and reduction of land use levies and rents according to law.

If an investor has advanced funds for compensations and relocation supports under a scheme already approved by a competent authority (from the date this Decree takes effect), the investor will receive refunds from the state budget with respect to land areas used for socialization purposes.

2. When an establishment in question receiving land use levy-exempt land wishes to receive land with land use levy payment or lease, land with one-time payment of land rent for the-lifetime of a project (without any reduction of or exemption from land use levy), it may do so according to current regulations and have its advanced amounts for land compensation and support (if any) deducted from the payable land use levy and rents.

In this case, the establishment may account the value of its land use rights into the investment project's assets and have the same rights and obligations as an economic organization which is allotted land with land use levy payment by the State according to the current land law.

3. When two or more investors register for a socialization project site, a bid shall be opened to select the bidder that best satisfies standards on size, quality and efficiency.

The Ministry of Planning and Investment shall assume the prime responsibility for. And coordinate with the Ministry of Natural Resources and Environment and other concerned ministries and branches in. providing specific guidance on the bidding in this case.

4. Establishments in question lawfully using land shall be granted land use right certificates and protected by the State in terms of lawful rights to land use and house and asset ownership according to law. The order of and procedures for allotting land leasing land, and granting land use right certificates comply with the current land law.

5. Establishments in question must use land for proper purposes in accordance with planning and the land law. Upon the expiration of the land allotment or lease term, if the establishment in question does not extend its land use, is dissolved or moves to another place, it must return the land to the State; when land is used for improper purposes or inefficiently, the State will recover it.

6. When receiving land with land use levy exemption or leasing land with land rent exemption, establishments in question may not account the value of land in use into the investment project's assets and use land as collateral for loans.

7. Establishments in question may not transfer the land allotted by the State for socialization projects. If transferred under a decision of a competent state agency, the land use purpose must not be changed. In this case, provincial-level People's Committees shall recover the land from the old investor for allotment or lease to a new one according to the current land law.

8. For land legally transferred from other individuals and organizations, establishments in question may account the value of land use rights into the investment project's assets and make investment capital depreciation according to law.

Article 7. Registration fee value-added tax import-export duties

1. An establishment in question is exempt from registration fees charged for the use of land and ownership of assets attached to land. Provincial-level People's Committees may consider and decide on reduction of, and exemption from infrastructure use fees for establishments in question according to law.

2. An establishment in question is entitled to preferential treatment regarding value-added tax and import-export duties under the Law on the Value-Added Tax. the Import Tax and Export Tax Law and other current regulations.

Article 8. Imposition of enterprise income tax

An establishment in question is entitled to a 10% enterprise income tax rate for the whole operation period.

If established on and after the date this Decree takes effect, the establishment in question is exempt from enterprise income tax for 4 years counting from the time of generating taxable incomes and enjoys a 50% reduction in the subsequent 5 years.

If established on and after the date this Decree takes effect in areas entitled to investment incentives specified in Appendix B to the Government's Decree No. 108/2006/ND-CP of September 22, 2006 the establishment in question is exempt from enterprise income tax for 4 years counting from the time of generating taxable incomes and enjoys a 50% reduction in the subsequent 9 years and a 10% tax rate for the remainder of its operation period.

If established before the effective date of this Decree, the establishment in question is treated as follows: If the enjoyment of preferential enterprise income tax treatment under previous regulations has expired, the 10% rate applies from the date this Decree takes effect. If not, the tax incentive policies of this Decree still apply after subtracting the time of enjoying incentive policies under previous regulations. The Ministry of Finance shall provide specific guidance on these cases.

If the establishment in question operates in multiple businesses, it must separately account incomes from activities of socialization to enjoy enterprise income tax incentive policies under this Decree. The establishment in question shall pay tax for incomes from other activities according to law.

Article 9. Credit incentive policies

Establishments in question specified in Articles 1 and 2 of this Decree may take investment credit loans or receive post-investment support according to the State's investment credit regulations.

Article 10. Capital raising

An establishment in question may raise capital in the form of share, capital contributions from staff and other lawful channels through cooperation and association with enterprises, economic and financial institutions, and domestic and overseas individuals for building material foundations.

Article 11. Social and health insurance

Employees of establishments in question may benefit from social and health insurance policies according to the State's current regulations.

Article 12. Commendation

1. Collectives and employees of establishments in question with outstanding services will be commended by the State according to law.

2. Individuals and collectives contributing to socialization activities will be recognized, encouraged and commended by the State according to law.

3. Ministries, branches and localities shall guide the order of and procedures for considering and commending individuals and organizations contributing to activities of socialization and establishments in question under their management according to law.

Article 13. Asset disposal upon transformation of operation

1. For land: State or semi-state establishments divested under decisions of competent authorities into non-state establishments or enterprises are allotted land by the State for continued operation. The land unused or used for improper purposes must be returned to the State.

2. For assets on land: The assets invested with or originated from the state budget must be inventoried and reevaluated for lease or re-sale to non-state establishments.

The agency competent to decide on the transformation of state or semi-state establishments into non-state ones shall decide on the sale or lease of the State's share of property to non-state establishments according to current regulations on asset management.

The Minister of Finance is assigned to decide on the disposal of state assets of establishments which are established under the Prime Minister's decisions and now transformed into non-state ones or enterprises.

3. When a semi-state unit of a state establishment is decided by a competent authority to become a state one. its assets must be inventoried and valued according to law for monitoring and management under the current regime on asset management.

Semi-state units assets formed from the raising of non-state capital for procurement and building are handled as follows:

a) Assets shall be returned to shareholders if they want to take them back:

b) If the state establishment agrees to take over the assets for use. a valuation council shall evaluate the assets to provide the basis for payment to shareholders;

c) If both the state establishment and shareholders do not want the assets, those assets shall be sold to the public for payment to shareholders.

4. When a private establishment owned by a collective is transformed into the one owned by-individuals, the collective's assets accumulated from the establishment's performance shall be identified and transferred to the individual-owned establishment for use on the principles of preserving, developing and not dividing among individuals the assets. The assets are entitled to state protection according to law.

Chapter III

SOURCES OF INCOME AND DISTRIBUTION OF FINANCIAL OUTPUT

Article 14. Sources of income

1. Fees and charges

An establishment in question is free to decide on the level of fees and charges on the principle of fully covering necessary expenses for its operation and accumulating capital for development investment.

2. Income from the provision of other services and products.

3. Profits from investment in joint ventures and associations: interests from saving deposits and bond yields.

4. State budget funds (if any), including:

a) Funds to perform orders placed by the State:

b) Funds to support scientific and technological research projects:

c) Funds to implement national target programs:

d) Funds to implement staff training programs: e) Interest subsidy; f) Other funds.

5. Other sources: grants, donations and gifts.

Article 15. Distribution of financial output

1. On the basis of annual results of financial activities, the income earned by an establishment in question after payment of expenses, loan interests and taxes according to law may be used to set up funds and divided among shareholders.

2. For non-state establishments and those established under the Enterprise Law operating in the domains encouraged for socialization, the formation of funds, payment of salary to workers and distribution of profits among shareholders may be decided by the Management Board (or School Council) or the head (if no management board exists) of a non-state establishment or an establishment in question in compliance with its organization and operation charter (for a non-state establishment) or the Enterprise Law (for a establishment in question set up under the Enterprise Law).

Chapter IV

RESPONSIBILITIES OF ESTABLISHMENTS IN QUESTION

Article 16. Responsibilities of establishments in question

1. An establishment in question shall register with a tax office to provide the basis for determining tax incentives and obligations.

2. An establishment in question shall comply with its operation charter, meet prescribed requirements on professional operations, human resources and material foundations in order to supply qualified products and services for the society.

3. An establishment in question shall publicize its charges and fees for each service and make its activities and finance transparent, including the level of state subsidy and specific amounts (if any) according to law.

It shall regularly report on its performance and financial status to the line management agency, finance agency and tax office of the same level according to law

4. An establishment in question shall meet requirements for inspection or examination by the finance agency and competent state agencies and fully, promptly supply documents related to the areas to be inspected or examined and be responsible for their accuracy and authenticity.

5. An establishment in question shall fulfill its accounting and statistical duties, be audited annually and publicize auditing results according to law.

Chapter V

STATE MANAGEMENT OF PROVIDERS OF SERVICES IN THE DOMAINS ENCOURAGED FOR SOCIALIZATION

Article 17. Responsibilities of line ministries

1. To coordinate with the Ministry of Natural Resources and Environment, concerned ministries and provincial-level People's Committees in formulating land use planning and plans for branches, domains and geographic areas.

2. To formulate socialization orientations: to provide guidance on criteria on sizes, standards and operation conditions for establishments in question under their management.

3. To promulgate policies and mechanisms to encourage socialization suitable to different forms of activity and meeting the demand for development of each domain in each period and each region.

4. To perform uniform state management of contents, programs quantity and quality of services offered by establishments in question in each domain to serve as a basis for implementation as well as for monitoring and supervision by levels, branches and the entire society.

5. To decide on the establishment or suspend the operation of establishments in question within the ambit of their functions and tasks and the decentralization by a competent agency according to law.

6. To manage and facilitate international cooperation of establishments in question under their management.

7. To assume the prime responsibility for, and coordinate with provincial-level People's Committees in, inspecting and examining establishments in question in observing state regulations: to handle violations according to law.

8. To formulate or guide provincial-level People's Committees in formulating, programs for, and take measures to manage, the operation of establishments in question to their aims, operation contents and service quality set by each line ministry.

9. To make reports on the performance of each area of activity of socialization under their management and synthesize the entire branch's activities of socialization and submit them to the Ministry of Finance every February for sum-up and report to the Prime Minister.

10. The Ministers of Education and Training: Labor. War invalids and Social Affairs: Health: Culture Sports and Tourism: and Natural Resources and Environment shall, according to their state management functions, coordinate with the Ministry of Finance, the Ministry of Home Affairs and concerned ministries and branches in. promulgating, or submitting to a competent authority for decision:

a) Conditions for the establishment and operation of establishments in question and standards on professional qualifications and physical facilities for establishments in question:

b) Conditions and procedures for and lists of state establishments to be transformed into non-state ones or enterprises;

c) Roadmaps and procedures for transforming semi-state establishments into non-state ones or enterprises.

Article 18. Responsibilities of provincial-level People's Committees

1. To formulate and manage land use planning and plans according to the current land law. to publicize land use master plans for the domains encouraged for socialization before December 31, 2008.

2. To formulate plans on human resource training and use to meet the demand for socialization.

3. To assign local land fund developers or state units to clear project sites before allotting or leasing land to establishments in question.

The assigned land fund developer or state unit of a province or centrally run city shall compensate and support resettlement for users of land to be used for socialization activities. The costs of compensations, supports and resettlement are covered by the state budget.

The central state budget will support targeted funds for difficulty-hit localities that need additional funds for paying site clearance compensations and supporting resettlement. The level of support is 70% for mountainous provinces or 50% for others. Provincial-level People's Committees shall report to provincial-level People's Councils for decision to use the income from land use levies, lotteries and local budget for paying the remaining costs.

Provinces and centrally run cities that may balance incomes to be paid to the central state budget may proactively allocate their local budget to pay compensations and support resettlement.

4. To direct and assign concerned agencies to hold biddings of projects for establishments in question according to this Decree.

5. Based on the size of local budget, to propose People's Councils of the same level to decide on mechanisms and levels of support of funds for infrastructure investment of establishments in question.

6. When formulating or adjusting land use planning and plans of provinces and centrally run cities, to set aside land for socialization activities. When formulating and approving master plans on development of new urban centers and industrial parks, to set aside land according to planning for the construction of establishments in question.

7. To publicize the order of and procedures for allotting and leasing land to establishments in question.

8. Depending on specific local situations, to promulgate specific incentive policies to encourage, promote and expand forms of socialization: to perform state management of establishments in question under the guidance of line ministries.

9. To supervise and inspect establishments in question in efficiently managing and using land for proper purposes: to handle violations according to law.

10. To make reports on the implementation of incentive policies for development of socialization of each domain every January and send them to line ministries which shall synthesize and submit them to the Ministry of Finance for further report to the Prime Minister.

Article 19.- Competence to license the establishment, transformation from state into non-state establishments, termination of operation and dissolution

1. An agency competent to decide on the formation of state and semi-state establishments may decide on their transformation into non-state establishments or enterprises.

2. The competence to decide on the establishment of non-state establishments in education and training, vocational training, healthcare, culture, sports and environment complies with law.

3. An agency competent to decide on the formation of non-state establishments may terminate their operation or dissolve them when they seriously violate provisions specified in their operation permits or violate the law.

Article 20. Foreign-invested establishments

Foreign-invested establishments in the domains encouraged for socialization according to this Decree are set up according to law.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 21. This Decree takes effect 15 days after its publication in "CONG BAO."

All previous regulations on incentive policies to encourage socialization in education-training vocational training; healthcare: culture: physical training and sports; and environment which are contrary to this Decree are annulled.

Non-state establishments operating in the domains specified in Article 1 of this Decree and licensed under the Government's Decrees No. 73/1999/ND-CP of August 19, 1999 and No. 53/2006/ND-CP of May 25, 2006, shall register with licensing agencies and tax offices to enjoy incentive policies specified in this Decree.

Individuals and organizations operating under the Enterprise Law which have separate projects in the domains encouraged for socialization on the Prime Minister's list shall register with a competent state agency and tax office to enjoy incentive policies specified in this Decree.

Article 22. The Ministers of Education and Training; Labor. War Invalids and Social Affairs; Culture. Sports and Tourism; and Natural Resources and Environment shall formulate lists of types, sizes and quality standards for each domain and submit them to the Prime Minister for decision: formulate and promulgate according to their competence standards and procedures for organizing and establishing bodies to accredit the quality of units and organizations operating in the domains encouraged for socialization: assume the prime responsibility for, and coordinate with concerned ministries and branches in. providing specific guidance on the application of this Decree suitable to characteristics of operation and organization in each domain.

Article 23. Ministers, heads of ministerial-level agencies, heads of government-attached agencies and presidents of provincial-level People's Committees shall implement this Decree.